A new federal loan program for small businesses affected by the coronavirus began last Friday. It’s part of the $2 trillion stimulus package passed by Congress and is designed to help businesses struggling right now stay afloat. But some Charlotte businesses say applying for one of the loans so far has been anything but smooth.
For more on the state of Charlotte’s business community amid COVID-19 we turn to Tony Mecia of the Charlotte Ledger Business Newsletter for our segment Biz Worthy.
Marshall Terry: Tony, you recently spoke with six small businesses in Charlotte that applied for one of these loans. What were their complaints?
Tony Mecia: Well, Marshall, this program, it's called the Paycheck Protection Program. It was part of this coronavirus relief package that went through Washington a couple of weeks ago, and basically it got off to a little bit of a rocky start. The business owners that I talked to said there were some problems on its first day, which was last Friday, in applying for the loans, in going online and filling out the forms.
Some of the banks weren't quite ready to process that. The bigger issue is that ... the federal government trying to rush out all this money, $350 billion nationally, and do it very quickly, and the banks weren't really set up for that. They've really had to hustle and scramble to try to accommodate the huge interest in these loans.
Terry: And you report almost all of these businesses that you spoke to were concerned about fraud, right?
Mecia: Yeah. I mean, you know, they, of course, said that they could use the money, but they said this is such a rushed process and that the banks are not really going to be doing their traditional underwriting and checking out that everything is on the up and up. And there's such a demand to get the money out the door that they wouldn't be surprised if a lot of companies would be receiving these loans that maybe aren't supposed to qualify for them. So, you know, that's going to be a concern any time you try to do something as quickly as the federal government is doing this.
Terry: And as I mentioned, these loans are meant to keep struggling businesses afloat. How much can they get, exactly? And would that be enough to keep them going?
Mecia: It's actually a pretty significant amount. The businesses have to put in all kinds of information on these loan forms that include the amount of payroll, the number of full-time employees, and they're eligible for loans of up to two and a half times their monthly payroll to be paid out over an eight-week period. And so, that's a pretty substantial amount of money for a lot of these businesses.
And the other good part about this, from the businesses' point of view, is that they're not just loans, but these loans actually convert to grants. The loans would be forgiven if the businesses can meet certain qualifications — if they can keep their people employed, there are few other benchmarks they have to meet. So, this is basically, it can be for a lot of these businesses a grant program that gives them money to get their workers off of unemployment. Now, it only lasts for eight weeks. So, if this goes longer than that, I think you're going to see a lot of demand for an extension of this program.
Terry: In addition to help from the federal government, Mecklenburg County has also approved a loan program for small businesses that are affected. The county says it can provide about 150 loans. They range from $10,000 to $35,000. There are way more businesses than 150 in the county, so how stiff is the competition going to be to get one of those county loans?
Mecia: I think it's going to be pretty intense to try and get one of those. Again, now this is a little bit different than the federal program in the sense that these are just loans. These are loans with 3% interest between $10,000 and $35,000 aimed at Mecklenburg County businesses that have 50 or fewer employees. So, you know, the county's rationale is they say, "Hey, look, we can get this money out even quicker than the federal government can.
We can get it to these businesses that need it in fewer than 10 days sort of as a bridge for this federal money that might be coming in."
So, I think you're right, Marshall. I think there will be some competition for that, but it's a fairly limited pool of money that the county is making available, given I think it's about 30,000 or so small businesses in the county.
Terry: Among the businesses doing well right now in Mecklenburg are liquor stores. You report sales at ABC stores have spiked in the last month. By how much?
Mecia: Yeah, I talked to the head of the local ABC board. He said they were up about 29% on retail sales in March compared with the previous March. He said a lot of that was because people early in the month were stockpiling liquor. They were afraid that the ABC stores were going to close entirely and they didn't want to be without, right?. So, a lot of that was stockpiling. He said they had people come in, said that they want two or three bottles instead of just one.
He said they were upgrading, you know, the bigger sizes, because people were buying in bulk. Of course, now liquor stores are not closing. The ABC stores have reduced their hours, but they're seeing pretty brisk sales on the retail side. They said that compensates for a huge loss of revenue on the restaurant and bar side. ABC sells directly to bars and restaurants. They said that business was off about 50%.
Terry: Why exactly are liquor stores considered an essential business under the governor's order?
Mecia: Well, it's a very good question. You know, you don't usually think of a glass of scotch at the end of the day as being something that is absolutely essential. But, you know, Sen. Jeff Jackson on Twitter said this week, he was asked that question, and he gave a pretty blunt reply and said that, you know, the truth is that there are so many people that are dependent on alcohol, that are chemically hooked on alcohol, that if they were to close the liquor stores, you'd see a huge spike in people going to emergency rooms and continuing to burden the health care system.
Terry: So, it's got kind of a public health angle to it then?
Mecia: Yeah. Who would've thought the public health angle is to keep the liquor stores open? But yes, there is a public health dimension to it.